Oil surged to its highest level in three weeks as the dollar weakened before a Federal Reserve meeting tomorrow which will probably signal a new round of unconventional monetary easing. Crude gained a second day before a government report forecast to show that U.S. supplies of diesel and heating oil are at their lowest level since July. U.S. stockpiles of distillate fuels probably declined 1 million barrels last week, according to a Bloomberg News survey before tomorrow’s Energy Department report. Consumers are happy with oil between $70 and $90 a barrel, said Ali al-Naimi, Saudi Arabia’s oil minister. “Prices have been supported by the Saudis increasing their expected trading from $70 to $80, to $70 to $90,” said Thorbjoern Bak Jensen, a Global Risk Management analyst based in Middelfart, Denmark. “The most important thing for the market this week will be the central bank meetings.” Crude for December delivery rose as much as $1.19, or 1.4 percent, to $84.14 a barrel in electronic trading on the New York Mercantile Exchange. That’s the highest price since Oct. 7. It was at $84.04 at 12:33 p.m. London time. Brent crude for December settlement rose as much as $1.04, or 1.2 percent, to $85.66 a barrel on the London-based ICE Futures Europe exchange. The Fed, meeting in Washington today and tomorrow, is expected to restart a program of securities purchases to spur growth, reduce unemployment and increase inflation, said 53 of 56 economists surveyed by Bloomberg News. The dollar lost 1 percent to trade at $1.4025 against the single European currency. Economic Revival “Market participants want to see the result of the Fed meeting,” said Ken Hasegawa, a commodity derivative sales manager at brokers Newedge in Tokyo. “For the rest of the year, the market should be sustained around this level. Like the Saudi minister said, that’s a pretty happy price for everyone.” Manufacturing in the U.S. expanded at the fastest pace in five months in October, the Institute for Supply Management’s U.S. factory index showed yesterday, pointing to renewed strength in the industry that led the country out of recession. Separately, China’s Federation of Logistics and Purchasing said the country’s purchasing managers’ index climbed in October to a six-month high. U.S. crude inventories probably increased 1.7 million barrels last week, based on the median estimate from 12 analysts surveyed by Bloomberg News before an Energy Department report tomorrow. They surged 5 million barrels in the week ended Oct. 22, the most since July. Stockpiles were at 366.2 million, 13 percent above the five-year average level. “The market is very well-supplied,” Al-Naimi said at an industry gathering in Singapore yesterday. “A little bit oversupplied but it doesn’t seem to be depressing the price.” Saudi Arabia is the biggest producer in the Organization of Petroleum Exporting Countries, a 12-member group that pumps about 40 percent of the world’s crude. To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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